Useless Labor

I am repeatedly struck by how poorly scholars, not all of them economists, grasp the most fundamental principles of economics. Even though I am not myself an economist. Let me hazard that one reason for the preponderance of sloppy analysis among economists is that, like children of the rentier, they know how to use the system, but they have little grasp for why it works.

Having taught this history of economic thought for more than twelve semesters, I have attempted to instruct the next generation of economists why the system works.

As you know, I have been working through Yuval Noah Harari’s three volumes. I took a brief break in order to read GWF Hegel’s Phenomenology and Slovoj Žižek’s Puppet and the Dwarf. But I am now back at it. Overall, Harari is well worth the read, all one thousand or so pages of him. But, along with most scholars, including many economists, Harari has a blind spot: economics. Here is what I mean:

The technological revolution might soon push billions of humans out of the job market and create a massive new “useless class,” leading to social and political upheavals that no existing ideology knows how to handle.

Harari, Yuval Noah. 21 Lessons for the 21st Century (p. 19). Random House Publishing Group. Kindle Edition.

Like most scholars, including most economists, Harari believes that people work in order to produce goods that people need, or, in any case, believe they need. Under capitalism, however, people work because they are part of what every economics textbook calls the Circular Economy. Here is how it works:

There is nothing specially mysterious about this system. People work in order to produce goods, which other people (or firms) purchase in order to generate returns for investors and satisfy consumer (or firm) need/want. The capitalist economy forms what since the 1850s (WS Jevons, K Marx) economists have characterized as a comprehensive, integrated, self-regulating system for distributing abstract value. In practice, what this means is that should any critical “link in the chain” (C Menger) fail, the entire system fails. But — and this is the linchpin — since abstract value is derived marginally, there arise no points within capitalism where any critical link in the chain gives rise to systemic failure.

Let us take Harari’s dire prediction. Machines are better equipped to perform nearly all of the tasks, now including the most sensitive tasks, humans perform. So, for example, Harari calls attention to the loan officer at a bank. The loan officer has access to all of the data that AI has. But, in addition to the data the loan officer enjoys, AI enjoys sensors that are able to detect heart beat, serotonin levels, pupil dilation, perspiration; and, besides, is not inclined to be side-tracked by the bad lunch the loan officer just ate, the fight she had with her girlfriend, the subconscious resentment she bears toward her employer, and so on. Moreover, in a comprehensive, integrated, self-regulating system, AI can simultaneously be purchasing and selling shares in assets that benefit shareholders in the loan-making institution. What is Harari missing?

Harari is missing the marginal value of uselessness. Because, remember, under capitalism, everything enjoys a marginal value. Which brings us to the marginal value of useless labor?

Here is what happened during the Great Depression. So little did human beings come to be valued that they collected and sold cigarette butts, sharpened pencils, earned money from dancing marathons; in short, anything. That is to say, the marginal value of human beings plummeted. But, as John Maynard Keynes pointed out, this was not evidence for market failure. To the contrary, it was evidence that the Circular Economy worked. It sent the value of the least valued goods downward until investors were ready, at a given price, to have their pencil sharpened.

But, of course, this also meant that the human pencil sharpener was purchasing goods only equal to her wage. In fairness, like Lord Keynes, Harari recognizes that capitalism is equipped with a nifty solution to this problem. Because the Circular Economy is not a temporally static system, a dollar today is not worth the same as tomorrow’s dollar. (Indeed, as Gary Becker noted in 1962, taking a page from Alfred Marshall’s 1891 Principles, a dollar here, today, is not worth the same as a dollar elsewhere or in someone else’s pocket today. $1≠$1.) This is because money is always a temporally and spatially constrained value, relative to the aggregate value of all dollars and dependent on questions of where and when. When I borrow $1 from the future to inspire a consumer to spend $1 today, that future dollar may be worth more, it may be worth less, than today’s dollar. But, if the economy is in a trough, then it is reasonable to assume that tomorrow’s dollar is worth more than today’s. How much more? Economists differ. But only marginally. Keynes’ point was that any debt accumulated today sufficient to stimulate economic growth over time greater than its cost is worth the investment.

The temporal and spatial envelope in which value modulates is social in character. This does not make it any less real. Rather does it make this envelope hyper-real. Consider, for example, the condition under which, as in Hunger Games or Drowned Cities, human beings have become little more than cockroaches. Their value reduced to virtually nothing. Their overlords invested with absolute power. There is still, here, a marginal calculation. How much value, if any, do I need to extract from the subject population? How much value do I spend policing the subject population? What is the risk of an uprising? What is the marginal cost of political stability? What die-rate will the subject population tolerate?

The point is, for economists who wish to reflect rigorously, there is absolutely no direct correlation of innovation to job loss. Not in the long run. Because the marginal calculation is a social calculation. Value is always, inevitably, social. But, if I have simply learned the formulas passed down and modified from Jevons to Marshall to Keynes to Krugman to Romer, how would I know that this is only social?

In 2018 the University of California, Berkeley, Department of Economics did three things: (1) they declared Economics a STEM major; (2) they eliminated the History of Economic Thought; and (3) they failed to renew my contract.

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